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HERE Acquisition By The Germans: Open Innovation On The Cards

It was announced earlier this week that the German trio of BMW, Daimler, and VW (Audi) will pay about 2.71 billion euros to acquire Nokia's mapping business, HERE. The consortium is planning to hire more software engineers to continue the path-breaking work done by HERE in the field of navigation and vehicle automation. While the deal value is much lower than the rumored $4 billion-plus that Nokia was asking for and the $7 billion-plus that Nokia paid to acquire Navteq, the idea of turning HERE into a platform that can be used across the auto community is novel and could change the way this industry does innovative development. HERE is the ideal choice for these automakers to prevent Google from gaining an upper hand in this market. Despite all of these minute details, the promise from the consortium to not to interfere in HERE’s operational business and using it as an open platform will do greater good for this industry.

A few key implications to this deal are:

The value of map and location assets – Close on the heels of HERE’s purchase by the Germans, there was a rumor floating around that TomTom was scouting for a buyer for its automotive mapping products (which was denied by investor relations). HERE’s larger assets are the complete array of location related cloud products; including 2D/3D navigation maps, real-time traffic, location-based services and high-definition 3D mapping for highly automated driving that enables automakers to innovate in many areas ranging from predictive navigation to even V2X communications. Besides Google, HERE is the only company to have well-covered HD maps that includes road attributes and other important 3D data that will be a crucial long-range sensor in the highly automated driving segment. Companies like TomTom, despite the recent announcement of working with Bosch in this area, are very late to join the party. HERE even announced a recent pilot in Finland with V2I services using its location assets. The German auto community just chose a viable alternative to Google. Kudos to them as they have picked the right one, however the problem emerges when the exploration happens on what they intend to do with HERE.

Interest of automakers competing with the Germans – The consortium has made an assumption that the open mapping platform they create around HERE will be used as a starting point by a number of automakers. The problem that emerges here is why would a Cadillac want to use a piece of technology from a competing automaker and also use it in a time when mapping assets are not even in their radar of technologies to use for achieving higher levels of automakers. And what would now happen to HERE’s relationship with automakers, like Jaguar with whom they unveiled a few interesting predictive navigation products recently. One can draw a parallel here to the many cross OEM technology sharing joint ventures that have failed, but the key here is the overall advancement of the IOT enabled automated car using an industry wide open collaboration. Much like Tesla sharing its patents and even Toyota’s willingness to share its patents around the Mirai Hydrogen FCV, I think the time is right for this extremely close shell competitive industry to let go of some of that and think of advancements together.

Other vendors will win initially – One can definitely expect some knee-jerk reactions from a few automakers who will jump ship from HERE to vendors like TomTom or even use OSM just to avoid doing business with competition. Despite the quality of TomTom’s maps and the company’s ability to push new mapping features out faster, it still remains a very small fish in the automotive pond where HERE holds almost 80 percent share. It remains to be seen if this means end of day for Google, as many in the industry are predicting, or if it actually gives Google a great platform to come out with an independent third-party-tested solution that actually works. If Google or Apple decide to buy TomTom (it is rumored that Apple tried a couple of years ago), then the dynamics will change dramatically, at which point these CE giants cannot be ignored. Additionally, Baidu and Facebook, companies whom use HERE’s data for its mapping efforts, are expected to continue to use it because there is no obvious clash of business interest.

It is worth pointing out, the acquisition - despite the benefit - provides an under pressure reaction from the trio to prevent the progress of Google into this space. It is interesting to consider, acquisitions or JV’s done by German auto companies outside of Germany (E.g. Daimler with Chrysler or BMW and Rover) have rarely worked, and it will be fascinating to see how this pans out and the reactions of the larger auto community.

This article was written with contribution from Praveen Chandrasekar, Research Manager, and Niranjan Manohar, Program Manager, for Frost & Sullivan’s Automotive & Transportation research practice

I am a Managing Partner in Frost & Sullivan, Regional Leader of its Middle East, Africa and South Asia (MEASA) operations and the company’s Global Practice Head of Mobili

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I am a Managing Partner in Frost & Sullivan, Regional Leader of its Middle East, Africa and South Asia (MEASA) operations and the company’s Global Practice Head of Mobility, Aerospace, Defence & Security teams. I am also the founder of a think tank group that works on future (Mega) trends. My team and I pioneered the “Macro to Micro” approach in analyzing Mega Trends in 2008, which has since been tried and tested with Fortune 1000 companies in developing white space opportunities. I authored “New Mega Trends,” published in 2012 with Palgrave Macmillan, which has since been sold in over 30 countries and is currently being translated into Chinese for a China market release in 2014. I consult Fortune 1000 companies (clients like P&G, Ford, Philips, BMW, Fiat group, Nissan, Toyota and UNIDO). I am an Engineer and have a MBA from Leeds University Business School, for whom I am now a member of their Advisory Board. I have also done an executive course at the Kellogg School of Management. I am a well-known thought leader and a charismatic futurist who combines engineering acumen with strong commercial experience. Follow me on Twitter: @Sarwant.